BILL NUMBER: SB 265	CHAPTERED  09/28/00

	CHAPTER   810
	FILED WITH SECRETARY OF STATE   SEPTEMBER 28, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 28, 2000
	PASSED THE SENATE   AUGUST 31, 2000
	PASSED THE ASSEMBLY   AUGUST 31, 2000
	AMENDED IN ASSEMBLY   AUGUST 30, 2000
	AMENDED IN ASSEMBLY   AUGUST 29, 2000
	AMENDED IN ASSEMBLY   AUGUST 25, 2000
	AMENDED IN ASSEMBLY   JULY 6, 2000
	AMENDED IN ASSEMBLY   JUNE 22, 2000
	AMENDED IN ASSEMBLY   JULY 8, 1999
	AMENDED IN SENATE   MAY 20, 1999
	AMENDED IN SENATE   APRIL 14, 1999
	AMENDED IN SENATE   MARCH 4, 1999

INTRODUCED BY   Senator Speier
   (Principal coauthor:  Assembly Member Gallegos)

                        FEBRUARY 1, 1999

   An act to add Article 4.6 (commencing with Section 1366.35) and
Article 10.5 (commencing with Section 1399.801) to, Chapter 2.2 of
Division 2 of the Health and Safety Code, and to add Section 10844
to, and to add Chapter 8.5 (commencing with Section 10785) and
Chapter 9.5 (commencing with Section 10900) to, Part 2 of Division 2
of, the Insurance Code, relating to health care coverage.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 265, Speier.  Health care coverage:  federally eligible defined
individuals.
   Existing law provides for the licensure and regulation of health
care service plans by the Department of Managed Care, and provides
that a willful violation of these provisions is a crime.  Existing
law also provides for the licensure and regulation of disability
insurers by the Department of Insurance.
   This bill would prohibit a health care service plan or disability
insurer providing coverage under an individual plan contract or
individual insurer benefit plan from declining to offer coverage to,
or denying enrollment of, a federally eligible defined individual, or
imposing any preexisting condition exclusion with respect to the
coverage.  This bill would require each plan and insurer to fairly
and affirmatively offer, market, and sell to federally eligible
defined individuals certain plan contracts and benefit plans that are
sold to individuals or to associations that include individuals in
each service area served by the plan or insurer.
   The bill would impose various requirements relating to coverage
required to be offered to federally eligible defined individuals and
to associated premiums.
   Because a willful violation of the bill's requirements with
respect to health care service plans would be a crime, this bill
would impose a state-mandated local program by expanding the
definition of a crime.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 4.6 (commencing with Section 1366.35) is added
to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:


      Article 4.6.  Coverage for Federally Eligible Defined
Individuals

   1366.35.  (a) A health care service plan providing coverage for
hospital, medical, or surgical benefits under an individual health
care service plan contract may not, with respect to a federally
eligible defined individual desiring to enroll in individual health
insurance coverage, decline to offer coverage to, or deny enrollment
of, the individual or impose any preexisting condition exclusion with
respect to the coverage.
   (b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
   (1) Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
   (2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
   (3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
   (4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
   (c) Every health care service plan shall comply with applicable
federal statutes and regulations regarding the provision of coverage
to federally eligible defined individuals, including any relevant
application periods.
   (d) A health care service plan shall offer the following health
benefit plan contracts under this section that are designed for, made
generally available to, are actively marketed to, and enroll,
individuals: (1) either the two most popular products as defined in
Section 300gg-41(c)(2) of Title 42 of the United States Code and
Section 148.120(c)(2) of Title 45 of the Code of Federal Regulations
or (2) the two most representative products as defined in Section
300gg-41(c)(3) of the United States Code and Section 148.120(c)(3) of
Title 45 of the Code of Federal Regulations, as determined by the
plan in compliance with federal law.  A health care service plan that
offers only one health benefit plan contract to individuals,
excluding health benefit plans offered to Medi-Cal or Medicare
beneficiaries, shall be deemed to be in compliance with this article
if it offers that health benefit plan contract to federally eligible
defined individuals in a manner consistent with this article.
   (e) (1) In the case of a health care service plan that offers
health insurance coverage in the individual market through a network
plan, the plan may do both of the following:
   (A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
   (B) Within the service area of the plan, deny coverage to
individuals if the plan has demonstrated to the director that the
plan will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to
existing group contractholders and enrollees and individual
enrollees, and that the plan is applying this paragraph uniformly to
individuals without regard to any health status related factor of the
individuals and without regard to whether the individuals are
federally eligible defined individuals.
   (2) A health care service plan, upon denying health insurance
coverage in any service area in accordance with subparagraph (B) of
paragraph (1), may not offer coverage in the individual market within
that service area for a period of 180 days after the coverage is
denied.
   (f) (1) A health care service plan may deny health insurance
coverage in the individual market to a federally eligible defined
individual if the plan has demonstrated to the director both of the
following:
   (A) The plan does not have the financial reserves necessary to
underwrite additional coverage.
   (B) The plan is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible individuals.
   (2) A health care service plan, upon denying individual health
insurance coverage in any service area in accordance with paragraph
(1), may not offer that coverage in the individual market within that
service area for a period of 180 days after the date the coverage is
denied or until the issuer has demonstrated to the director that the
plan has sufficient financial reserves to underwrite additional
coverage, whichever is later.
   (g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health insurance
coverage offered by a health care service plan in the individual
market in the same manner as it applies to a health care service plan
in connection with a group health benefit plan.
   (h) A health care service plan shall compensate a life agent or
fire and casualty broker-agent whose activities result in the
enrollment of federally eligible defined individuals in the same
manner and consistent with the renewal commission amounts as the plan
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan contract.
   (i) Every health care service plan shall disclose as part of its
COBRA or Cal-COBRA disclosure and enrollment documents, an
explanation of the availability of guaranteed access to coverage
under the Health Insurance Portability and Accountability Act of
1996, including the necessity to enroll in and exhaust COBRA or
Cal-COBRA benefits in order to become a federally eligible defined
individual.
   (j) No health care service plan may request documentation as to
whether or not a person is a federally eligible defined individual
other than is permitted under applicable federal law or regulations.

   (k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
   (l) This section shall apply to health care service plan contracts
offered, delivered, amended, or renewed on or after January 1, 2001.

  SEC. 2.  Article 10.5 (commencing with Section 1399.801) is added
to Chapter 2.2 of Division 2 of the Health and Safety Code, to read:


      Article 10.5.  Individual Access to Contracts for Health Care
Services

   1399.801.  As used in this article:
   (a) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other plans.  The term includes continuation or conversion
coverage but does not include accident only, credit, disability
income, Medicare supplement, long-term care, dental, vision, coverage
issued as a supplement to liability insurance, insurance arising out
of a workers' compensation or similar law, automobile medical
payment insurance, or insurance under which benefits are payable with
or without regard to fault and that is statutorily required to be
contained in any liability insurance policy or equivalent
self-insurance.
   (2) The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3) The medicaid program pursuant to Title XIX of the Social
Security Act.
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C.A. Chapter 55 (commencing with Section 1071)
(CHAMPUS).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A state health benefits risk pool.
   (8) A health plan offered under 5 U.S.C.A. Chapter 89 (commencing
with Section 8901) (FEHBP).
   (9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(l) of the Public Health Service Act,
as amended by Public Law 104-191, the Health Insurance Portability
and Accountability Act of 1996.
   (10) A health benefit plan under 22 U.S.C.A. 2504(e) of the Peace
Corps Act.
   (b) "Dependent" means the spouse or child of an eligible
individual or other individual applying for coverage, subject to
applicable terms of the health care plan contract covering the
eligible person.
   (c) "Federally eligible defined individual" means an individual
who as of the date on which the individual seeks coverage under this
part, (1) has 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002), (2) is
not eligible for coverage under a group health plan, Medicare, or
Medi-Cal, and has no other health insurance coverage, (3) was not
terminated from his or her most recent creditable coverage due to
nonpayment of premiums or fraud, and (4) if offered continuation
coverage under COBRA or Cal-COBRA, had elected and exhausted this
coverage.
   (d) "In force business" means an existing health benefit plan
contract issued by the plan to a federally eligible defined
individual.
   (e) "New business" means a health care service plan contract
issued to an eligible individual that is not the plan's in force
business.
   (f) "Preexisting condition provision" means a contract provision
that excludes coverage for charges and expenses incurred during a
specified period following the eligible individual's effective date,
as to a condition for which medical advice, diagnosis, and care of
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
   1399.802.  Every health care service plan offering plan contracts
to individuals shall, in addition to complying with the provisions of
this chapter and the rules adopted thereunder, comply with the
provisions of this article.
   1399.803.  Nothing in this article shall be construed to preclude
the application of this chapter to either of the following:  (a) an
association, trust, or other organization acting as a health care
service plan as defined under Section 1345, or (b) an association,
trust, multiple employer welfare arrangement, or other organization
or person presenting information regarding a health care service plan
to persons who may be interested in subscribing or enrolling in the
plan.
   1399.804.  (a) Commencing January 1, 2001, a plan shall fairly and
affirmatively offer, market, and sell the health care service plan
contracts described in subdivision (d) of Section 1366.35 that are
sold to individuals or to associations that include individuals to
all federally eligible defined individuals in each service area in
which the plan provides or arranges for the provision of health care
services.  Each plan shall make available to each federally eligible
defined individual the identified health care service plan contracts
which the plan offers and sells to individuals or to associations
that include individuals.
   (b) The plan may not reject an application from a federally
eligible defined individual for a health care service plan contract
under the following circumstances:
   (1) The federally eligible defined individual as defined by
subdivision (c) of Section 1399.801 agrees to make the required
premium payments.
   (2) The federally eligible defined individual, and his or her
dependents who are to be covered by the plan contract, work or reside
in the service area in which the plan provides or otherwise arranges
for the provision of health care services.
   (c) No plan or solicitor shall, directly or indirectly, encourage
or direct federally eligible defined individuals to refrain from
filing an application for coverage with a plan because of health
status, claims experience, industry, occupation, receipt of health
care, genetic information, evidence of insurability, including
conditions arising out of acts of domestic violence, disability, or
geographic location provided that it is within the plan's approved
service area.
   (d) No plan shall, directly or indirectly, enter into any
contract, agreement, or arrangement with a solicitor that provides
for or results in the compensation paid to a solicitor for the sale
of a health care service plan contract to be varied because of health
status, claims experience, industry, occupation, receipt of health
care, genetic information, evidence of insurability, including
conditions arising out of acts of domestic violence, disability, or
geographic location of the individual.
   (e) Each plan shall comply with the requirements of Section
1374.3.
   1399.805.  (a) (1) After the federally eligible defined individual
submits a completed application form for a plan contract, the plan
shall, within 30 days, notify the individual of the individual's
actual premium charges for that plan contract, unless the plan has
provided notice of the premium charge prior to the application being
filed. In no case shall the premium charged for any health care
service plan contract identified in subdivision (d) of Section
1366.35 exceed the following amounts:
   (A) For health care service plan contracts that offer services
through a preferred provider arrangement, the average premium paid by
a subscriber of the Major Risk Medical Insurance Program who is of
the same age and resides in the same geographic area as the federally
eligible defined individual.  However, for federally qualified
individuals who are between the ages of 60 and 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.
   (B) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services through
a preferred provider arrangement, 170 percent of the standard
premium charged to an individual who is of the same age and resides
in the same geographic area as the federally eligible defined
individual.  However, for federally qualified individuals who are
between the ages of 60 and 64, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an individual
who is 59 years of age and resides in the same geographic area as the
federally eligible defined individual. The individual shall have 30
days in which to exercise the right to buy coverage at the quoted
premium rates.
   (2) A plan may adjust the premium based on family size, not to
exceed the following amounts:
   (A) For health care service plans that offer services through a
preferred provider arrangement, the average of the Major Risk Medical
Insurance Program rate for families of the same size that reside in
the same geographic area as the federally eligible defined
individual.
   (B) For health care service plans identified in subdivision (d) of
Section 1366.35 that do not offer services through a preferred
provider  arrangement, 170 percent of the standard premium charged to
a family that is of the same size and resides in the same geographic
area as the federally eligible defined individual.
   (b) When a federally eligible defined individual submits a premium
payment, based on the quoted premium charges, and that payment is
delivered or postmarked, whichever occurs earlier, within the first
15 days of the month, coverage shall begin no later than the first
day of the following month.  When that payment is neither delivered
or postmarked until after the 15th day of a month, coverage shall
become effective no later than the first day of the second month
following delivery or postmark of the payment.
   (c) During the first 30 days after the effective date of the plan
contract, the individual shall have the option of changing coverage
to a different plan contract offered by the same health care service
plan.  If the individual notified the plan of the change within the
first 15 days of a month, coverage under the new plan contract shall
become effective no later than the first day of the following month.
If an enrolled individual notified the plan of the change after the
15th day of a month, coverage under the new plan contract shall
become effective no later than the first day of the second month
following notification.
   1399.806.  A plan may not exclude any federally eligible defined
individual, or his or her dependents, who would otherwise be entitled
to health care services on the basis of an actual or expected health
condition of that individual or dependent.  No plan contract may
limit or exclude coverage for a specific federally eligible defined
individual, or his or her dependents, by type of illness, treatment,
medical condition, or accident.
   1399.809.  The director may require a plan to discontinue the
offering of contracts or the acceptance of applications from any
individual upon a determination by the director that the plan does
not have sufficient financial viability, organization, and
administrative capacity to assure the delivery of health care
services to its enrollees.  In determining whether the conditions of
this section have been met, the director shall consider, but not be
limited to, the plan's compliance with the requirements of Section
1367, Article 6 (commencing with Section 1375), and the rules adopted
thereunder.
   1399.810.  All health care service plan contracts offered to a
federally eligible defined individual shall be renewable with respect
to the individual and dependents at the option of the contractholder
except in cases of:
   (a) Nonpayment of the required premiums.
   (b) Fraud or misrepresentation by the contractholder.
   (c) The plan ceases to provide or arrange for the provision of
health care services for individual health care service plan
contracts in this state, provided, however, that the following
conditions are satisfied:
   (1) Notice of the decision to cease new or existing individual
health benefit plans in this state is provided to the director and to
the contractholder.
   (2) Individual health care service plan contracts subject to this
chapter shall not be canceled for 180 days after the date of the
notice required under paragraph (1) and for that business of a plan
that remains in force, any plan that ceases to offer for sale new
individual health care service plan contracts shall continue to be
governed by this article with respect to business conducted under
this article.
   (3) A plan that ceases to write new individual business in this
state after January 1, 2001, shall be prohibited from offering for
sale new individual health care service plan contracts in this state
for a period of three years from the date of the notice to the
director.
   (d) When the plan withdraws a health care service plan contract
from the individual market, provided that the plan makes available to
eligible individuals all plan contracts that it makes available to
new individual business, and provided that the premium for the new
plan contract complies with the renewal increase requirements set
forth in Section 1399.811.
   1399.811.  Premiums for contracts offered, delivered, amended, or
renewed by plans on or after January 1, 2001, shall be subject to the
following requirements:
   (a) The premium for new business for a federally eligible defined
individual shall not exceed the following amounts:
   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual.  However, for federally qualified
individuals who are between the ages of 60 to 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.
   (2) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services through
a preferred provider arrangement, 170 percent of the standard
premium charged to an individual who is of the same age and resides
in the same geographic area as the federally eligible defined
individual.  However, for federally qualified individuals who are
between the ages of 60 to 64, inclusive, the premium shall not exceed
170 percent of the standard premium charged to an individual who is
59 years of age and resides in the same geographic area as the
federally eligible defined individual.
   (b) The premium for in force business for a federally eligible
defined individual shall not exceed the following amounts:
   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual.  However, for federally qualified
individuals who are between the ages of 60 and 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.
   (2) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services through
a preferred provider arrangement, 170 percent of the standard
premium charged to an individual who is of the same age and resides
in the same geographic area as the federally eligible defined
individual.   However, for federally qualified individuals who are
between the ages of 60 and 64, inclusive, the premium shall not
exceed 170 percent of the standard premium charged to an individual
who is 59 years of age and resides in the same geographic area as the
federally eligible defined individual.  The premium effective on
January 1, 2001, shall apply to in force business at the earlier of
either the time of renewal or July 1, 2001.
   (c) The premium applied to a federally eligible defined individual
may not increase by more than the following amounts:
   (1) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that offer services through a
preferred provider  arrangement, the average increase in the premiums
charged to a subscriber of the Major Risk Medical Insurance Program
who is of the same age and resides in the same geographic area as the
federally eligible defined individual.
   (2) For health care service plan contracts identified in
subdivision (d) of Section 1366.35 that do not offer services through
a preferred provider arrangement, the increase in premiums charged
to a nonfederally qualified individual who is of the same age and
resides in the same geographic area as the federally defined eligible
individual.  The premium for an eligible individual may not be
modified more frequently than every 12 months.
   (2) For a contract that a plan has discontinued offering, the
premium applied to the first rating period of the new contract that
the federally eligible defined individual elects to purchase shall be
no greater than the premium applied in the prior rating period to
the discontinued contract.
   1399.812.  Plans shall apply premiums consistently with respect to
all federally eligible defined individuals who apply for coverage.
   1399.813.  In connection with the offering for sale of any plan
contract to an individual, each plan shall make a reasonable
disclosure, as part of its solicitation and sales materials, of all
individual contracts.
   1399.814.  Nothing in this article shall be construed to require a
health benefit plan to offer a contract to an individual if the plan
does not otherwise offer contracts to individuals.
   1399.815.  (a) At least 20 business days prior to renewing or
amending a plan contract subject to this article, or at least 20
business days prior to the initial offering of a plan contract
subject to this article, a plan shall file a notice of an amendment
with the director in accordance with the provisions of Section 1352.
The notice of an amendment shall include a statement certifying that
the plan is in compliance with subdivision (a) of Section 1399.805
and with Section 1399.811.  Any action by the director, as permitted
under Section 1352, to disapprove, suspend, or postpone the plan's
use of a plan contract shall be in writing, specifying the reasons
the plan contract does not comply with the requirements of this
chapter.
   (b) Prior to making any changes in the premium, the plan shall
file an amendment in accordance with the provisions of Section 1352,
and shall include a statement certifying the plan is in compliance
with subdivision (a) of Section 1399.805 and with Section 1399.811.
All other changes to a plan contract previously filed with the
director pursuant to subdivision (a) shall be filed as an amendment
in accordance with the provisions of Section 1352, unless the change
otherwise would require the filing of a material modification.
   1399.816.  Carriers and health care service plans that offer
contracts to individuals may elect to establish a mechanism or method
to share in the financing of high-risk individuals.  This mechanism
or method shall be established through a committee of all carriers
and health care service plans offering coverage to individuals by
July 1, 2002, and shall be implemented by January 1, 2003.  If
carriers and health care service plans wish to establish a
risk-sharing mechanism but cannot agree on the terms and conditions
of such an agreement, the Managed Risk Medical Insurance Board shall
develop a risk-sharing mechanism or method by January 1, 2003, and it
shall be implemented by July 1, 2003.

     1399.817.  The director may issue regulations that are necessary
to carry out the purposes of this article.  Any rules and
regulations adopted pursuant to this article may be adopted as
emergency regulations in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.  Until December 31, 2001, the adoption of these regulations
shall be deemed an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare.  The regulations shall be enforced by the director.
   1399.818.  This article shall apply to health care service plan
contracts offered, delivered, amended, or renewed on or after January
1, 2001.
  SEC. 3.  Chapter 8.5 (commencing with Section 10785) is added to
Part 2 of Division 2 of the Insurance Code, to read:

      CHAPTER 8.5.  COVERAGE FOR FEDERALLY ELIGIBLE DEFINED
INDIVIDUALS

   10785.  (a) A disability insurer that covers hospital, medical, or
surgical expenses under an individual health benefit plan as defined
in subdivision (a) of Section 10198.6 may not, with respect to a
federally eligible defined individual desiring to enroll in
individual health insurance coverage, decline to offer coverage to,
or deny enrollment of, the individual or impose any preexisting
condition exclusion with respect to the coverage.
   (b) For purposes of this section, "federally eligible defined
individual" means an individual who, as of the date on which the
individual seeks coverage under this section, meets all of the
following conditions:
   (1) Has had 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002).
   (2) Is not eligible for coverage under a group health plan,
Medicare, or Medi-Cal, and does not have other health insurance
coverage.
   (3) Was not terminated from his or her most recent creditable
coverage due to nonpayment of premiums or fraud.
   (4) If offered continuation coverage under COBRA or Cal-COBRA, has
elected and exhausted that coverage.
   (c) Every disability insurer that covers hospital, medical, or
surgical expenses shall comply with applicable federal statutes and
regulations regarding the provision of coverage to federally eligible
defined individuals, including any relevant application periods.
   (d) A disability insurer shall offer the following health benefit
plans under this section that are designed for, made generally
available to, are actively marketed to, and enroll, individuals:  (1)
either the two most popular products as defined in Section  300gg-41
(c)(2) of Title 42 of the United States Code and Section 148.120(c)
(2) of Title 45 of the Code of Federal Regulations or (2) the two
most representative products as defined in Section 300gg-41(c)(3) of
the United States Code and Section 148.120(c)(3) of Title 45 of the
Code of Federal Regulations, as determined by the insurer in
compliance with federal law.  An insurer that offers only one health
benefit plan to individuals, excluding health benefit plans offered
to Medi-Cal or Medicare beneficiaries, shall be deemed to be in
compliance with this chapter if it offers that health benefit plan
contract to federally eligible defined individuals in a manner
consistent with this chapter.
   (e) (1) In the case of a disability insurer that offers health
benefit plans in the individual market through a network plan, the
insurer may do both of the following:
   (A) Limit the individuals who may be enrolled under that coverage
to those who live, reside, or work within the service area for the
network plan.
   (B) Within the service area covered by the health benefit plan,
deny coverage to individuals if the insurer has demonstrated to the
commissioner that the insured will not have the capacity to deliver
services adequately to additional individual insureds because of its
obligations to existing group policyholders, group contractholders
and insureds, and individual insureds, and that the insurer is
applying this paragraph uniformly to individuals without regard to
any health status-related factor of the individuals and without
regard to whether the individuals are federally eligible defined
individuals.
   (2) A disability insurer, upon denying health insurance coverage
in any service area in accordance with subparagraph (B) of paragraph
(1), may not offer health benefit plans through a network in the
individual market within that service area for a period of 180 days
after the coverage is denied.
   (f) (1) A disability insurer may deny health insurance coverage in
the individual market to a federally eligible defined individual if
the insurer has demonstrated to the commissioner both of the
following:
   (A) The insurer does not have the financial reserves necessary to
underwrite additional coverage.
   (B) The insurer is applying this subdivision uniformly to all
individuals in the individual market and without regard to any health
status-related factor of the individuals and without regard to
whether the individuals are federally eligible defined individuals.
   (2) A disability insurer, upon denying individual health insurance
coverage in any service area in accordance with paragraph (1), may
not offer that coverage in the individual market within that service
area for a period of 180 days after the date the coverage is denied
or until the insurer has demonstrated to the commissioner that the
insurer has sufficient financial reserves to underwrite additional
coverage, whichever is later.
   (g) The requirement pursuant to federal law to furnish a
certificate of creditable coverage shall apply to health benefits
plans offered by a disability insurer in the individual market in the
same manner as it applies to an insurer in connection with a group
health benefit plan policy or group health benefit plan contract.
   (h) A disability insurer shall compensate a life agent or fire and
casualty broker-agent whose activities result in the enrollment of
federally eligible defined individuals in the same manner and
consistent with the renewal commission amounts as the insurer
compensates life agents or fire and casualty broker-agents for other
enrollees who are not federally eligible defined individuals and who
are purchasing the same individual health benefit plan.
   (i) Every disability insurer shall disclose as part of its COBRA
or Cal-COBRA disclosure and enrollment documents, an explanation of
the availability of guaranteed access to coverage under the Health
Insurance Portability and Accountability Act of 1996, including the
necessity to enroll in and exhaust COBRA or Cal-COBRA benefits in
order to become a federally eligible defined individual.
   (j) No disability insurer may request documentation as to whether
or not a person is a federally eligible defined individual other than
is permitted under applicable federal law or regulations.
   (k) This section shall not apply to coverage defined as excepted
benefits pursuant to Section 300gg(c) of Title 42 of the United
States Code.
   (l) This section shall apply to policies or contracts offered,
delivered, amended, or renewed on or after January 1, 2001.
  SEC. 4.  Section 10844 is added to the Insurance Code, to read:
   10844.  A purchasing alliance may offer coverage pursuant to
Chapter 9.5 (commencing with Section 10900).
  SEC. 5.  Chapter 9.5 (commencing with Section 10900) is added to
Part 2 of Division 2 of the Insurance Code, to read:

      CHAPTER 9.5.  INDIVIDUAL ACCESS TO CONTRACTS FOR HEALTH CARE
SERVICES

   10900.  As used in this chapter:
   (a) "Benefit plan design" means a specific health coverage policy
issued by a carrier to individuals, to trustees of associations that
cover individuals.  It includes services covered and the levels of
copayment and deductibles, and it may include the professional
providers who are to provide those services and the sites where those
services are to be provided.  A benefit plan design may also be an
integrated system for the financing and delivery of quality health
services that has significant incentives for the covered individuals
to use the system.
   (b) "Carrier" means any disability insurance company or any other
entity that writes, issues, or administers health benefit plans, as
defined in subdivision (a) of Section 10198.6, that cover
individuals, regardless of the situs of the contract or master
policyholder.
   (c) "Creditable coverage" means:
   (1) Any individual or group policy, contract, or program that is
written or administered by a disability insurer, health care service
plan, fraternal benefits society, self-insured employer plan, or any
other entity, in this state or elsewhere, and that arranges or
provides medical, hospital, and surgical coverage not designed to
supplement other plans.  The term includes continuation or conversion
coverage but does not include accident only, credit, disability
income, Champus supplement, Medicare supplement, long-term care,
dental, vision, coverage issued as a supplement to liability
insurance, insurance arising out of a workers' compensation or
similar law, automobile medical payment insurance, or insurance under
which benefits are payable with or without regard to fault and that
is statutorily required to be contained in any liability insurance
policy or equivalent self-insurance.
   (2) The federal Medicare program pursuant to Title XVIII of the
Social Security Act.
   (3) The medicaid program pursuant to Title XIX of the Social
Security Act.
   (4) Any other publicly sponsored program, provided in this state
or elsewhere, of medical, hospital, and surgical care.
   (5) 10 U.S.C.A. Chapter 55 (commencing with Section 1071)
(CHAMPUS).
   (6) A medical care program of the Indian Health Service or of a
tribal organization.
   (7) A state health benefits risk pool.
   (8) A health plan offered under 5 U.S.C.A. Chapter 89 (commencing
with Section 8901) (FEHBP).
   (9) A public health plan as defined in federal regulations
authorized by Section 2701(c)(1)(l) of the Public Health Service Act,
as amended by Public Law 104-191.
   (10) A health benefit plan under Section 5(e) of the Peace Corps
Act (22 U.S.C.A. 2504(e)).
   (d) "Dependent" means the spouse or child of an eligible
individual or other individual applying for coverage, subject to
applicable terms of the health benefit plan covering the eligible
person.
   (e) "Federally eligible defined individual" means an individual
who as of the date on which the individual seeks coverage under this
part, (1) has 18 or more months of creditable coverage, and whose
most recent prior creditable coverage was under a group health plan,
a federal governmental plan maintained for federal employees, or a
governmental plan or church plan as defined in the federal Employee
Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1002), (2) is
not eligible for coverage under an employer-sponsored health benefit
plan, Medicare, or Medi-Cal, and has no other health insurance
coverage, (3) was not terminated from his or her most recent
creditable coverage due to nonpayment of premiums or fraud, and (4)
if offered continuation coverage under COBRA or Cal-COBRA, had
elected and exhausted such coverage.
   (f) "In force business" means an existing health benefit plan
issued by a carrier to a federally eligible defined individual.
   (g) "New business" means a health benefit plan issued to an
eligible individual that is not the carrier's in force business.
   (h) "Preexisting condition provision" means a policy provision
that excludes coverage for charges and expenses incurred during a
specified period following the eligible individual's effective date,
as to a condition for which medical advice, diagnosis, care, or
treatment was recommended or received during a specified period
immediately preceding the effective date of coverage.
   10901.  Every carrier offering health benefit plans to individuals
shall comply with the provisions of this chapter and the rules
adopted thereunder.
   10901.1.  Nothing in this chapter shall be construed to preclude
the application of this chapter to either of the following:  (a) an
association, trust, or other organization acting as a health care
service plan as defined under Section 1345, (b) an association,
trust, multiple employer welfare arrangement, or other organization
or person presenting information regarding a health benefit plan to
persons who may be interested in subscribing or enrolling in the
plan.
   10901.2.  (a) Commencing January 1, 2001, a carrier shall fairly
and affirmatively offer, market, and sell the health benefit plan
designs described in subdivision (d) of Section 10785 that are sold
to individuals or to associations that include individuals to all
federally eligible defined individuals in each geographic region in
which the carrier provides coverage for health care services.  Each
carrier shall make available to each federally eligible defined
individual the identified health benefit plan designs which the plan
offers and sells to individuals or to associations that include
individuals.
   (b) A carrier may not reject an application from a federally
eligible defined individual for a benefit plan design under the
following circumstances:
   (1) The federally eligible defined individual as defined by
subdivision (e) of Section 10900 agrees to make the required premium
payments.
   (2) The federally eligible defined individual, and his or her
dependents who are to be covered by the carrier, work or reside in
the service area in which the plan provides or otherwise arranges for
the provision of health care services.
   (c) No carrier or agent or broker shall, directly or indirectly,
encourage or direct federally eligible defined individuals to refrain
from filing an application for coverage with a carrier because of
health status, claims experience, industry, occupation, receipt of
health care, genetic information, evidence of insurability, including
conditions arising out of acts of domestic violence, disability, or
geographic location provided that it is within the carrier's approved
service area.
   (d) No carrier shall, directly or indirectly, enter into any
contract, agreement, or arrangement with an agent or broker that
provides for or results in the compensation paid to a solicitor for
the sale of a health benefit plan design to be varied because of
health status, claims experience, industry, occupation, receipt of
health care, genetic information, evidence of insurability, including
conditions arising out of acts of domestic violence, disability, or
geographic location of the individual.  This subdivision shall not
apply with respect to a compensation arrangement that provides
compensation to an agent or broker on the basis of percentage of
premium, provided that the percentage shall not vary for the reasons
listed in this subdivision.
   (e) If a carrier enters into a contract, agreement, or other
arrangement with a third-party administrator or other entity to
provide administrative, marketing, or other services related to the
offering of health benefit plans to individuals in this state, the
third-party administrator shall be subject to this chapter.
   10901.3.  (a) (1) After the federally eligible defined individual
submits a completed application form for a health benefit plan, the
carrier shall, within 30 days, notify the individual of the
individual's actual premium charges for that health benefit plan
design.  In no case shall the premium charged for any health benefit
plan identified in subdivision (d) of Section 10785 exceed the
following amounts:
   (A) For health benefit plans that offer services through a
preferred provider arrangement, the average premium paid by a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual.  However, for federally qualified
individuals who are between the ages of 60 and 64, inclusive, the
premium shall not exceed the average premium paid by a subscriber of
the Major Risk Medical Insurance Program who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.
   (B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual.   However, for
federally qualified individuals who are between the ages of 60 and
64, inclusive, the premium shall not exceed 170 percent of the
standard premium charged to an individual who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.  The individual shall have 30 days in which to exercise
the right to buy coverage at the quoted premium rates.
   (2) A carrier may adjust the premium based on family size, not to
exceed the following amounts:
   (A) For health benefit plans that offer services through a
preferred provider arrangement, the average of the Major Risk Medical
Insurance Program rate for families of the same size that reside in
the same geographic area as the federally eligible defined
individual.
   (B) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, 170 percent of the standard premium charged to a family
that is of the same size and resides in the same geographic area as
the federally eligible defined individual.
   (b) When a federally eligible defined individual submits a premium
payment, based on the quoted premium charges, and that payment is
delivered or postmarked, whichever occurs earlier, within the first
15 days of the month, coverage shall begin no later than the first
day of the following month.  When that payment is neither delivered
or postmarked until after the 15th day of a month, coverage shall
become effective no later than the first day of the second month
following delivery or postmark of the payment.
   (c) During the first 30 days after the effective date of the
health benefit plan, the individual shall have the option of changing
coverage to a different health benefit plan design offered by the
same carrier.  If the individual notified the plan of the change
within the first 15 days of a month, coverage under the new health
benefit plan shall become effective no later than the first day of
the following month.  If an enrolled individual notified the carrier
of the change after the 15th day of a month, coverage under the
health benefit plan shall become effective no later than the first
day of the second month following notification.
   10901.4.  A carrier may not exclude any federally eligible defined
individual, or his or her dependents, who would otherwise be
entitled to health care services, on the basis of an actual or
expected health condition of that individual or dependent.  No health
benefit plan may limit or exclude coverage for a specific federally
eligible defined individual, or his or her dependents, by type of
illness, treatment, medical condition, or accident.
   10901.7.  (a) The commissioner may require a carrier to
discontinue the offering of health benefit plans or the acceptance of
applications from any individual upon a determination by the
commissioner that the plan carrier does not have sufficient financial
viability, organization, and administrative capacity to assure the
delivery of health care services to its enrollees.
   (b) The commissioner's determination shall follow an evaluation
that includes a certification by the commissioner that the acceptance
of an application or applications would place the carrier in a
financially impaired condition.
   (c) A carrier that has not offered coverage or accepted
applications pursuant to this chapter shall not offer coverage or
accept applications for any individual until the commissioner has
determined that the carrier has ceased to be financially impaired.
   10901.8.  All health benefit plans offered to a federally eligible
defined individual shall be renewable with respect to the individual
and dependents at the option of the enrolled individual except in
cases of:
   (a) Nonpayment of the required premiums.
   (b) Fraud or misrepresentation by the enrolled individual.
   (c) The carrier ceases to provide or arrange for the provision of
health care services for individual health benefit plan contracts in
this state, provided, however, that the following conditions are
satisfied:
   (1) Notice of the decision to cease new or existing individual
health benefit plans in this state is provided to the commissioner
and to the contractholder.
   (2) Individual health benefit plan contracts subject to this
chapter shall not be canceled for 180 days after the date of the
notice required under paragraph (1) and for that business of a
carrier that remains in force, any carrier that ceases to offer for
sale new individual health benefit plan contracts shall continue to
be governed by this article with respect to business conducted under
this chapter.
   (3) A carrier that ceases to write new individual business in this
state after the effective date of this chapter shall be prohibited
from offering for sale new individual health benefit plan contracts
in this state for a period of three years from the date of the notice
to the commissioner.
   (d) When a carrier withdraws a health benefit plan design from the
individual market, provided that a carrier makes available to
eligible individuals all health plan benefit designs that it makes
available to new individual business, and provided that premium for
the new health benefit plan complies with the renewal increase
requirements set forth in Section 10901.9.
   10901.9.  Commencing January 1, 2001, premiums for health benefit
plans offered, delivered, amended, or renewed by carriers shall be
subject to the following requirements:
   (a) The premium for new business for a federally eligible defined
individual shall not exceed the following amounts:
   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the Major
Risk Medical Insurance Program who is of the same age and resides in
the same geographic area as the federally eligible defined
individual.  However, for federally qualified individuals who are
between the ages of 60 to 64, inclusive, the premium shall not exceed
the average premium paid by a subscriber of the Major Risk Medical
Insurance Program who is 59 years of age and resides in the same
geographic area as the federally eligible defined individual.
   (2) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual.  However, for
federally qualified individuals who are between the ages of 60 to 64,
inclusive, the premium shall not exceed 170 percent of the standard
premium charged to an individual who is 59 years of age and resides
in the same geographic area as the federally eligible defined
individual.
   (b) The premium for in force business for a federally eligible
defined individual shall not exceed the following amounts:
   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average premium paid by a subscriber of the Major
Risk Medical Insurance Program who is of the same age and resides in
the same geographic area as the federally eligible defined
individual.  However, for federally qualified individuals who are
between the ages of 60 and 64, inclusive, the premium shall not
exceed the average premium paid by a subscriber of the Major Risk
Medical Insurance Program who is 59 years of age and resides in the
same geographic area as the federally eligible defined individual.
   (2) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, 170 percent of the standard premium charged to an
individual who is of the same age and resides in the same geographic
area as the federally eligible defined individual.  However, for
federally qualified individuals who are between the ages of 60 and
64, inclusive, the premium shall not exceed 170 percent of the
standard premium charged to an individual who is 59 years of age and
resides in the same geographic area as the federally eligible defined
individual.  The premium effective on January 1, 2001, shall apply
to in force business at the earlier of either the time of renewal or
July 1, 2001.
   (c) The premium applied to a federally eligible defined individual
may not increase by more than the following amounts:
   (1) For health benefit plans identified in subdivision (d) of
Section 10785 that offer services through a preferred provider
arrangement, the average increase in the premiums charged to a
subscriber of the Major Risk Medical Insurance Program who is of the
same age and resides in the same geographic area as the federally
eligible defined individual.
   (2) For health benefit plans identified in subdivision (d) of
Section 10785 that do not offer services through a preferred provider
arrangement, the increase in premiums charged to a nonfederally
qualified individual who is of the same age and resides in the same
geographic area as the federally defined eligible individual. The
premium for an eligible individual may not be modified more
frequently than every 12 months.
   (2) For a contract that a carrier has discontinued offering, the
premium applied to the first rating period of the new contract that
the federally eligible defined individual elects to purchase shall be
no greater than the premium applied in the prior rating period to
the discontinued contract.
   10902.  Carriers shall apply premiums consistently with respect to
all federally eligible defined individuals who apply for coverage.
   10902.1.  In connection with the offering for sale of any health
benefit plan designed to an individual, each carrier shall make a
reasonable disclosure, as part of its solicitation and sales
materials, of all individual contracts.
                                                         10902.2.
Nothing in this chapter shall be construed to require a health
benefit plan to offer a contract to an individual if the carrier does
not otherwise offer contracts to individuals.
   10902.3.  (a) At least 20 business days prior to renewing or
amending a health benefit plan contract subject to this chapter, or
at least 20 business days prior to the initial offering of a health
benefit plan subject to this chapter, a carrier shall file a
statement with the commissioner in the same manner as required for
small employers as outlined in Section 10717.  The statement shall
include a statement certifying that the carrier is in compliance with
subdivision (a) of Section 10901.3 and with Section 10901.9.  Any
action by the commissioner, as permitted under Section 10717, to
disapprove, suspend, or postpone the plan's use of a carrier's health
benefit plan design shall be in writing, specifying the reasons the
health benefit plan does not comply with the requirements of this
chapter.
   (b) Prior to making any changes in the premium, the carrier shall
file an amendment in the same manner as required for small employers
as outlined in Section 10717, and shall include a statement
certifying the carrier is in compliance with subdivision (a) of
Section 10901.3 and with Section 10901.9.  All other changes to a
health benefit plan previously filed with the commissioner pursuant
to subdivision (a) shall be filed as an amendment in the same manner
as required for small employers as outlined in Section 10717.
   10902.4.  Carriers and health care service plans that offer
contracts to individuals may elect to establish a mechanism or method
to share in the financing of high-risk individuals.  This mechanism
or method shall be established through a committee of all carriers
and health care service plans offering coverage to individuals by
July 1, 2002, and shall be implemented by January 1, 2003.  If
carriers and health care service plans wish to establish a
risk-sharing mechanism but cannot agree on the terms and conditions
of such an agreement, the Managed Risk Medical Insurance Board shall
develop a risk-sharing mechanism or method by January 1, 2003, and it
shall be implemented by July 1, 2003.
   10902.5.  The commissioner may issue regulations that are
necessary to carry out the purposes of this chapter.  Any rules and
regulations adopted pursuant to this chapter may be adopted as
emergency regulations in accordance with Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.  Until December 31, 2001, the adoption of these regulations
shall be deemed an emergency and necessary for the immediate
preservation of the public peace, health and safety, or general
welfare.  The regulations shall be enforced by the commissioner.
   10902.6.  This chapter shall apply to policies or contracts
offered, delivered, amended, or renewed on or after January 1, 2001.

  SEC. 6.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
